Apollo Tyres Limited
NSE:APOLLOTYRE
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Apollo Tyres Limited
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[Audio Gap] Chief Financial Officer and the Investor Relations team. I'll now hand over the call to Mr. Kanwar for his opening remarks, post which, we will start Q&A. Over to you, Mr. Kanwar.
Well, thank you, and a good afternoon, everyone, and a very warm welcome to Apollo Tyres Quarter 3 Earnings Call. Let me start by thanking all our stakeholders for their continued support, which has helped us report another healthy quarter despite our several headwinds. The results during these difficult times gives me immense confidence on the way forward. And as I said during our last interaction, we remain extremely bullish in the long and medium term. While the pandemic situation continues to unfold, I would like to take this opportunity to thank the Indian government for successfully managing one of the largest vaccine drives ever undertaken. As for the latest economic survey held by various reasons, including widespread vaccine coverage, Indian economy is expected to grow at 8% to 8.5% in FY '23, and Apollo is very well placed to leverage this growth. Moving to the business. The quarter was once again impacted by rising raw material costs and a third wave of COVID that hit India. On the positive side, latest COVID wave in India did not result in any huge supply chain disruptions, and our European operations reported another very, very strong quarter. We continue to expand our product range and footprint across key markets. The pricing environment continues to remain steady, and we have been able to take price hikes in Q3 as well. Moving forward, we will keep a close eye on the markets, and we intend to take further price actions at the opportune time to reach our targeted margin range. We continue to work on key focus areas. During the last 2 years, the teams have worked extremely hard in a very difficult environment to lay foundations for a bright future, and the results are already starting to show. Our strategic actions in Europe, along with the relentless focus on enriching our sales mix, has helped Europe manufacturing and sales operations report a double-digit growth in top line, and more importantly, our EBITDA margins were in excess of 20% in the current quarter. The share of UHP, an ultra-high-performance tires, in Europe today stands at 43% of the entire pie. We have been talking about increasing focus in this segment, and I'm extremely happy to share that the journey has been steeper than that was targeted and has been one of the key drivers of profitable growth in Europe. Similarly, in India, we continue to enrich our sales mix. We have recently launched our premium car tire brand, Vredestein, in India, and this should help us further accelerate our journey towards premium space in the Indian passenger car segment. Similarly, we are at the forefront of driving radialization in segments like light truck, commercial vehicles, 2-wheeler radials and this should further help us enrich our product mix in our domestic market. We are further growing our presence in the OHT category to continue to drive towards a richer sales mix. The efforts on developing new markets is paying off in terms of sharp growth in developed profitable markets like North America and would further enhance growth in profitability in future. Furthermore, after successful execution of the specialization of the Enschede plant, we have optimized our European manufacturing blueprint. The results of the same are clearly visible in the strength of our consolidated margins despite steep raw material cost push. In fact, Q3 has once again highlighted the underlying strengths of our business model for diversified and a derisked business model. Our continued focus on R&D and digitalization are some of the key pillars of our ever-evolving business model and ensure that we are future-ready. Among other areas, specific tires for electric vehicles has been one of the key focus areas for the R&D team. We are cognizant of changes in the automobile and mobility space and are fully prepared to leverage the upcoming opportunity. While the EV space is at infancy and is evolving, we believe growing preference for EVs would impact tire industry positively. Work by our R&D teams ensure that we remain very well placed to leverage this opportunity. Another important area of work for R&D is sustainability. Our R&D teams are helping us increase usage of recycled material and sustainable material as we move forward. While we are still in early stages, I will come back with more qualitative and quantitative information on our work on all these areas in the next due course of time. The digitalization has been another thrust area for us as we are preparing for the future. We are not only leveraging digitalization to increase or improve market engagement through customer digitalization, but also undertaking projects like digitalization and integration of our supply chains, our journey towards Industry 4.0 and centralization and transformation of our back office processes to drive our efficiencies. Lastly, but not the least, we believe sustainability is one of the basic pillars of business, and there is a lot of work happening on this front. Some of the work being undertaken under our sustainable journey are as follows: a focus on increasing usage of recycled and sustainable raw materials; secondly, reducing usage of fossil fuel, achieving efficiency to achieve sustainable manufacturing; #3 is reducing our carbon footprint in distribution and supply chain by usage of electric vehicles; improvement in supply chain efficiencies; and lastly, the work of the end of life of our tires. I want to reiterate that sustainability is a key focus area for Apollo, and I'll keep on coming back with updates in this regard as we go ahead. Finally, in terms of outlook, we are optimistic about demand momentum, although cost inflation could continue to weigh on operating performance in the near term. We will continue to work on negating RM cost pressure through improvement in product and enriching our channel mix selectively and well-timed pricing actions across our key markets. The team is highly motivated and are focused on achieving our vision of 2026. We continue to cost control and be judicious about CapEx to ensure focus on profitability and the return on our capital. Going forward also, we will focus sharply on free cash flows and on growth CapExes.With this, I would like to conclude my opening remarks and hand over the call to Gaurav. Thank you. Stay safe. God bless. Gaurav, over to you.
Thank you, Neeraj, and good afternoon, ladies and gentlemen. Continuing from where Neeraj left, let me start by reiterating our commitment to the health and well-being of all our stakeholders. Let me first address the most recent matter which would be there in your mind, CCI's order of yesterday evening imposing penalty on 5 tire manufacturers and our association, ATMA. The company does not agree with the findings of the commission, and we will take necessary steps under the law to appeal against the order after a more detailed examination of the rollout.Moving back to business operations. In India, the much anticipated economic recovery in second half has been delayed. Softness in the demand environment from November onwards, coupled with continued RM inflation, impacted our operating performance in Q3 of FY '22. On the positive side, in spite of a weak demand environment, the pricing environment remains stable. We have taken small price increases across categories in replacement segment. But we need to take further price increases going forward, as Neeraj mentioned, to fully pass on the RM cost inflation. While our margins were impacted in the last few quarters given the steep cost pressures, we remain committed to achieve our mid-teens EBITDA margin target in the medium to long term. As [indiscernible], we have witnessed over the last 4 quarters the Europe operations once again underscored its relevance as a market, along with the benefits of diversification and derisking of business model by reporting very strong operating performance in Q3. While the demand environment is in a better shape, these are still uncertain times. Given the various strategic and operational measures taken through last 2 years in both India and Europe operations, we are far better placed to face the current situation. Moving to the financial results. The consolidated revenue for the quarter stood at INR 57 billion, a growth of 10% over the same quarter last year and a growth of 12% on a sequential basis. On a YTD basis, the revenue stood at INR 154 billion, a growth of 24% over the same period last year. The consolidated EBITDA for the quarter stood at INR 7.4 billion, a margin of 13% compared to 19.8% in the same period last year, but sequentially up from 12.6% in the last quarter. YTD basis, the EBITDA stood at INR 19.5 million, a margin of 12.7%. The margin performance for this quarter and the current year have been impacted by the steep increases in RM cost, while we've continued a tight lid on other costs. Coming to the balance sheet. We've been able to maintain our leverage ratio given the strong focus on cash flows. The net debt-to-EBITDA was at 1.8x. In India operations, the revenue for the quarter was INR 37.9 billion, a growth of 11% over the same period last year and 4% on a sequential basis. There was a very strong growth in exports, though the OE business was a slight decline sequentially. In terms of product categories, the demand was weaker in the TBR and the farm segment. On YTD basis, revenue stood at INR 107 billion, a growth of 32% Y-on-Y. The EBITDA for the quarter at INR 3.5 billion was a margin of 9.1%, down sequentially from 10.3% in the preceding quarter. The Indian operations while facing these headwinds continue to maintain a tight control on inventory and CapEx to tackle the situation. We see signs of demand picking up which should flow into the results in near term. Moving on to European operations. The revenue for the quarter were a record EUR 167 million, up 19% compared to the same period last year and 21% sequentially. Even on a YTD basis, the revenue was up 16% compared to the same period last year. We continue to make inroads into the market and grow and have gained market share across product categories. The UHP mix in the PCR segment is at 43%, a significant improvement in line with our vision that we have been talking about. The EBITDA for the quarter at EUR 34 million, as mentioned by Neeraj, crossed 20% compared to a below 16% for the same period last year. For the 9-month period, we are looking to report record EBITDA numbers in the current year. We are at EUR 77 million currently, a margin of 18.3% compared to 10.3% last year. This margin recovery has been on the base of the restructuring that was carried out, but supported by strong volume growth, improvement in product mix, manufacturing cost optimization and cost containment measures. With this, I conclude my opening comments. We would be happy to take your questions.
Thank you, Mr. Kanwar. Thank you, Gaurav, for your opening remarks. So now we will begin with the Q&A. Anyone who wishes to ask a question, please use the raise hand option on Zoom. We will start with Ashutosh Tiwari.
Yes, are we audible?
Yes, Ashutosh.
Yes. My congrats on a strong Europe performance during the quarter. My first question is, in Europe, you already reached in this quarter 43% sales from UHP trials. I think earlier, you were talking about 35%, 36% is a target. So how should we read it? Is it like the quarter phenomena, this high number? Or this can sustain going ahead?
No. Very clearly, this is not a quarter phenomena. It is a sustainable customer acquisition. Also, I want to tell you that all the products that are in the UHP and UUHP in the test results are holding podium positions. So they are either #1 or #2 in the Vredestein brand. And therefore, we are gaining market share, and the pie has gone up from 36% to 43%.
And generally, historically, obviously, third quarter has always been the higher margin on the winter tire sales. But considering that UHP mix has gone up and probably you're seeing that can sustain also in the subsequent quarter. So I'm not talking about Q3 margins, but generally margins will remain on the higher side in Europe operation going ahead versus probably what we are guiding last year when restructuring happened.
Firstly, there are 2 or 3 points that you must keep in mind. These profit margins will be sustainable. I'm not saying they will be at 20% or 15%, but they will be on the higher side. Given 2 or 3 things that actions that we have taken, 1 was obviously the restructuring of the manufacturing base. As you know, tires have moved into Hungary and into India. With this, what has happened, the cost of manufacturing for Europe has come down drastically. Even Enschede plant, which was restructured, the cost of manufacturing has come down. Hungary continues to come down as far as manufacturing is concerned. So that's 1 big point. The second point is because of the enrichment of the product mix, you will have more profit margins. And lastly, OHT is playing a very important role. And as you would know, Vredestein in Europe, in the OHT segment in [ agri truck ], OHT has a very pricing premium position. And that market is growing. And so that will be another part of the profit pool into Europe.
So are we seeing good growth in that OHT segment as well like, say, in the recent quarters?
Yes, we are. And we continue to grow. As you know, we are supplying from India and from our Dutch plant.
And lastly, coming to India, there is a lot of margin pressure because of price increase, delay in taking price increases. Now are we planning any price increase in the current quarter? That's one. And secondly, how is the demand? I think Q3 was a bit weak in the present market, but how do you see the demand picking up now maybe from February onwards?
So your first question, yes, the answer is yes. We will keep on correcting our prices, and we are correcting in quarter 4. We have already announced price increases in various product categories, and we'll continue to do because there is a lag effect, like you said. So that's a challenge, and we will continue to take small steps in increasing our prices. On your second point, as far as demand is concerned, we are seeing a very upbeat demand in quarter 4. And this is coming basically on the back of a lot of the infrastructure projects that are going into the country. And in the recent budget also, you have seen that India will be spending on roads infrastructure a lot more than what they were spending. Already, we've got projections from the OEMs for the quarter 4, specifically in CV. They've been very bullish. It's gone at least 100% more than what it was in quarter 3. Even in PCR, the semiconductor issue is a bit stable. So we are also seeing growth in PCR. The agri industry still is at a low level. But given that the season will start in March, we are pretty optimistic that agri will also come back.
Next in line, we have Raghunandhan N. L.
Congrats on the strong Europe performance. Firstly, on capacity. The YTD capacity utilization is strong in India at over 80%. Can you talk about how you look at expansion? Would you focus more on brownfield and look at staggered expansion so that the company sustains positive free cash flow generation, say, in FY '23, '24? If you can throw some light about your thought process. And also, if you can share FY '22, '23 CapEx requirement.
Gaurav, I will take the strategic question, and you can give the numbers. So Raghunandhan, we will not be doing any major CapEx in the next 3 to 4 years. We have, as you know, developed 3 very large greenfield capacities in the past 11 years, which is Chennai and then Hungary and then Andhra. We -- the main thing we are doing now is to look at our debottlenecking of our plants in all these 2 categories, especially in TBR and passenger car radial. We are running at 80%, but we believe that we can enhance productivity through some of the initiatives that we are taking within the company, which is mainly to do around digitalization. So that will give us data, AI and machine learning will give us a lot of data, which will throw up how we can reduce cycle times and increase our productions from the same equipment. There will be some small, small CapExes to try and manage the situation. And the other thing is that we are also now looking at enriching our product mix, is what I mentioned to you in my opening speech. Thereby, I mean that we will target higher-end tires, more profitable margin tires and therefore, utilize that capacity in a far better sense to look at more profitable products. Gaurav, do you want to throw some light on CapEx?
Yes. We are in the process of finalizing the budget. And as Neeraj mentioned, the current levels of utilization will not warrant any big CapEx in India immediately. So we will go the brownfield route and judicious CapEx. The numbers are not exactly finalized, but the India CapEx for FY '23 should be in the range of INR 1,000 crores to INR 1,100 crores.
Gaurav, that's very useful. My second question, considering the seasonally strong quarter in Europe, margins have reached double digit at the EBIT level. And even on a YTD basis, margins are very strong. On a sustainable basis, what would be the range of margin you would be happy with for Europe operations?
Gaurav, you want to answer?
So Raghu, as is our practice, we will not give out margin guidance. But if we look at on a YTD basis, the kind of Europe results, yes, this is a seasonal quarter and a high. But you can look at our results over the last 4 quarters, and we would very much want to be in the kind of range where we are now over a longer period and continue to look at opportunities to improve margins further.
Understood. And lastly, on the RM cost, if you can indicate what is the kind of pressure you see on a Q-o-Q basis for Q4. And also if you can share the commodity-wise prices, which you kindly share every quarter.
So going forward, we see the RM costs going up by another about 3%. So there is a small inflation further, which will need to be tackled. On your next question, which is the kind of raw material prices that we have seen in the current quarter. So natural rubber was at around INR 180 a kg; synthetic rubber at INR 1.75 a kg; carbon black at INR 100 a kg; and steel core at INR 175 a kg.
And next, we have Nishit Jalan.
My first question is more on the India side. I just wanted to probe a little bit further on the demand side. You mentioned that we are seeing signs of recovery in demand. Was it only limited to OEMs or you have started seeing some recovery on the replacement side as well? And secondly, if you can quantify the kind of volume growth that we saw in this quarter and the kind of price hikes we took in last quarter and what we have already announced in 4Q.
Gaurav, you want to take it?
Yes. Nishit, the volume for the India operations was up 3% vis-a-vis last year. So not a big volume growth given the weak pressure. A large part of the top line growth came through pricing actions. On a sequential basis, again, the volumes were up only 3%. Of course, in Europe, a large part of the game was volume led. In terms of pricing actions that have been announced or we will look, it would again be in the region of low single digits, in the region of 2% to 3%.
And Gaurav, on part of demand recovery on the replacement side?
There is a stronger recovery on the replacement, Nishit, that we are seeing. Replacement is also showing signs of pickup, though the bigger signs of recoveries on the OEM side where the volumes go up.
Okay. And Gaurav, you talked about a 3% RM inflation that we can see next quarter. Given the increase in crude prices, do you continue to see further price increases -- sorry, cost increases beyond 4Q as well? Is that understanding correct?
We seem to be, Nishit, seeing some tapering of the RM prices. Too early to say, given the uncertainty on crude, but rubber seems to be coming down. So expectation is that we may have seen the peak of raw material prices in Q4 or maybe in Q1 of next year.
Okay. Got it. My second question is on Europe. Obviously, 19% Y-o-Y growth is very, very commendable. Could you break it down between volume price increase? I would assume that there would have been a decent price increase that you have taken in Europe as well, plus this mix have also -- would have also helped our ASPs. So just wanted some color on how volumes growth and all has behaved and how have you fared vis-a-vis industry.
So the volumes in our Europe operations were up 14%. As mentioned, we have grown faster than the industry. To give you 1 benchmark figure, in this quarter, the passenger car tire industry for Europe was up 9%, and we grew faster than that.
This 14% would include higher growth that we are seeing in the off-highway and the TBR side as well. So our PV industry growth would be slightly lower than the 14%. Is that correct?
Yes.
And just 1 last follow-up. You talked about INR 1,000 crores to INR 1,100 crores CapEx in FY '23. FY '22 numbers remained until, I think, it was around INR 1,600 crores, if I'm not wrong.
We had changed the INR 1,600 crores to INR 1,800 crores when the year started, Nishit, on the back of investments into digitalization, et cetera. We would probably come in lower than what we had guided on that INR 1,800 crores. So it will be somewhere between the INR 1,600 crores to INR 1,800 crores.
Next, we have Siddharth Bera.
Sir, on the CapEx, where again we were expecting after this big Andhra greenfield CapEx FY '23 is likely to be only the maintenance CapEx generally for the India business. So can you help us understand of the CapEx we indicated, how much on the maintenance? Or are we looking at any brownfield expansion also?
Siddharth, there is no major brownfield expansion planned for next year. There will be some overflow as we slowed down the Andhra CapEx, which flows into next year. Given the situation over the last 2 years, we had slowed down our CapEx spend. Most of this is maintenance CapEx plus spends on R&D and digitalization, the 2 focus areas that Neeraj talked about. There will be some very small brownfield CapEx in our existing plants, but no major growth CapEx next year.
Still, I mean, even if I assume INR 7,000 crores to INR 8,000 crores maintenance -- INR 700 crores to INR 800 crores maintenance CapEx, will that be right number? And that probably will then continue over the period?
No, that will not continue as a maintenance CapEx. This includes CapEx into the existing plants, given the capacities at which they would be run, including looking at productivity improvements. So it's a mix of CapExes going into the existing plants, which is not just maintenance in nature, but also productivity improvements, digital, et cetera. The true maintenance CapEx across the operations would be more in the nature of INR 300 crores to INR 350 crores.
Okay. Got it, sir. And the second is on the RM side. In this quarter, we have seen some inventory adjustment costs also coming in because of the weaker demand. So anything to highlight here in the quarter? Was there any inventory adjustment costs as well?
No. We would have used some of the inventory, but no major impact there.
Okay. Got it. And lastly, sir, if you can share the lift in comp revenue and margin. That will be my last question.
Sorry, I didn't get your last question, Siddharth.
The lift in comp revenue and margin for Europe.
[indiscernible] the rise on.
Yes [indiscernible]. So rise in comp revenue was INR 68 million, and the margin was 11% [ revenue ].
The next in queue is Jinesh Gandhi.
Gaurav, my question pertains to the RM prices. So any sense on what kind of under recovery still exists at end of third quarter?
Jinesh, we've taken price increases in the replacement segment, et cetera, ranging between 10% to 12%. In terms of an under recovery, so to say, on an RM side, we would be off by about at least 6% to 7%.
6% to 7%, and including what we expect in the fourth quarter or that will be over and above this?
Since fourth quarter is also seeing a further RM increase. So you asked a question about up to Q3, I was mentioning timetable.
Got it. 6% to 7% is still [indiscernible]. And similarly, in the European market, we have started seeing RM cost pressures has reflected an increase in or reduction in gross margins. So there also, do you expect further increase happening in the fourth quarter? And secondly, what kind of price increases are we taking there?
So yes, a similar cost push from the RM side would be there for European operations also. So that will be true of any tire player across the globe. And we have announced small price increases into our summer range to take care of those.
Next, we have Pramod Amthe.
So question one is with regard to the industry tire exports. If I had to look at the tire association, it looks like there is a very strong uptick in exports more driven by U.S. and Europe. Wanted to know what is the reason for the same and what has been your participation in this strong growth. And there was a case you -- the industry was making for PLI. Any expectations there?
I think, Pramod, I can speak for ourselves. Our whole derisking strategy that we have put in place for the past 6 years is now paying out in terms of exports. So we have opened sales and marketing offices in Highveld and in Dubai for the Middle East and Africa. And now a lot of focus into North America with LatAm. And all these 4 markets are showing us very positive signs for the Vredestein brand in passenger car and for Apollo truck/bus radial tires. And so our exports have gone up. Now Gaurav will tell you the exact figure. But year-on-year, our exports are positively high, and these are going to profitable markets. So we have derisked ourselves from just being in 1 country and looking at other profit pools around the globe. Gaurav, can you give some highlight numbers on export?
So Pramod, our exports over this 9-month period on volume terms also has more than doubled. So the growth is more than 100%. So while the overall industry itself has pushed exports into the various markets, and there are focus markets that Neeraj mentioned, but again, we have done better than our peers, and our growth is more than 100% on these groups.
And Gaurav, is it more for Asian markets or the across the volumes?
It is across.
And is there an industry trend which is more shifting towards U.S., Europe and you guys want to catch it up? Or you are also participating equally in those segments?
We are an equal participant. And as, Pramod, we've been talking and you will remember that North America is a focus market for us, the R&D team has been working on products to be specifically designed for the North American market, the South American market. Those are now beginning to give results. So this is not a quick strategy of this year alone as we saw in export opportunity. This is something we've been working on for a number of years with teams in place across these few various geographies, which is now reaping the results in this year and providing us, in a way, a derisking strategy from the just dependence on Indian market alone.
Second question is with regard to the TBR, Indian TBR side. Wanted to check, considering that there are new capacities which are throwing up production into the marketplace. And is the market share is a limitation, which is limitation acting for your pricing actions? And how do you see this panning out in the next couple of quarters?
Pramod, I believe that the pricing action has been more governed by a weaker demand because even the current capacity is excess based on the current demand situation. There have been not the appropriate level of utilization of TBR capacity. And hence, that demand environment led to pricing action or taking price increases in line with the raw material cost push being difficult. And to a certain extent, there has been, because of pressure on fuel prices and general inflation, a shift back to truck bias. So we've seen a much stronger demand on the bias side, and there, our capacity has been running into the 90s.
Next, we have Basudeb Banerjee.
Yes, so to continue with the similar query as last question. So just wanted to know, at current juncture, what is the total TBR capacity? What is the level of utilization? And where do we see end of FY '23 in terms of capacity?
Sure. So Basudeb, the TBR capacity is a little short of 15,000 tires per day across our 2 plants, which is Chennai and the new greenfield in AP. Our current level of utilization is at about 75%.
And the same thing in TPD terms, tonnes per day?
In terms of tonnes per day, roughly, you can take 15,000 into 65 kgs of -- 975 tonnes.
And the same thing after FY '23 end, like when full Andhra phase operation getting operational?
Sure. Sorry, I was talking about this as a steady state. There is only a small scale up that will happen in the AP plant on TBR. There is no further expansion plan on TBR as of now.
So ballpark, one can say that FY '23 end capacity will be 1,000 TPD, and today, we are operating at 75%?
Yes.
Sure, sir. Basically, as you rightly said, that orders from truck OEMs in showing that Q4 demand itself is very high compared to Q3. So this 75% can move up if there is a strong demand for the next 12 to 18 months.
That is the correct. The OE demand moves up quickly. But we are, given the focus on free cash flow, et cetera, going to be judicious on CapEx and not going to set up any capacity ahead of time, particularly on the TBR front, given that it's a fairly capital-intensive product category.
So in that way, that will be -- one can infer that one of your competitor also deferred or canceled their TBR expansion plan. So broadly, one can say that if upcycle of trucks is there to stay for a foreseeable future and no major capacity addition in TBR, so as you rightly said, that you are underutilizing the TBR capacity. So in next 2 years, if demand picks up, pricing power should improve?
Possibly, yes.
We next have a follow-up question from Ashutosh Tiwari.
Yes. So firstly, in terms of interest cost and debt levels. Does interest cost go up further from here in terms of quarterly level? What you've seen in third quarter? Or now it's kind of near to peak?
The current levels, Ashutosh, should be more or less stable. They may be going up on the working capital debt as the revenues grow. But there is also debt repayment that will have happen. So there should not be much increase in the interest cost.
Okay. Okay. And that level is around INR 50 crores, INR 100 crores as of now.
We are talking about India operations or [ consol ]?
Both. And also India, if you can provide, sir, a review.
So India, the gross debt levels are slightly under INR 5,000 crores at about 40 -- between 48 and 49. And on a consolidated basis, they are a little short of INR 7,000 crores gross debt.
And cash is around then INR 1,800 crores, INR 1,900 crores?
Cash is about INR 1,900 crores. So the gross debt is about INR 5,100 crores on a consolidated basis.
Okay. And like you mentioned that in TBR, utilization plan is 75%, what is the utilization level currently in PCR? And can you show -- tell us the capacity right now?
So in PCR, our capacity utilization is close to 90%. And the India capacity is -- with completion of Andhra Pradesh, which is still in a ramp-up phase, so the current capacity is a figure which is always moving, it will cross 50,000 tires per day in India.
Okay. So you are saying 90%, so you are operating for 45,000 currently?
Currently, the capacity in AP hasn't reached its terminal of Phase 1.
So how much we are operating right now around in terms of per day production?
I'll have to check that number, so we'll need a little time.
Okay. And lastly, on this Vredestein agriculture segment. What would be our market share in European market? And any targets or thought process we have in terms of improving that over the next 2, 3 years?
Our market share in the Europe operations is about 6% plus. There are no specific targets to say. I would say the bigger focus of the overall operations, putting aside market shares in a particular product category, is to grow, but more importantly, grow profitably and maintain or improve the profitability levels that we've been reporting now over the last few quarters.
The 6% you mentioned is the market share in the OHT segment, you mean?
That's correct.
Okay. And lastly, on the CCI penalty thing. What do you think will the course of action, like, say, you go to higher courts and tell, first, you get a tribunal for that? What is your process, if you can provide some color?
So the next step, once we get the order, is to study the detailed order. And then there's a time line to when appear to the appellate tribunal. And only post that process is the Supreme Court. So it's a fairly long road ahead on the legal report side.
Next, we have a follow-up from Nishit Jalan.
Yes. Just 1 follow-up question on the export side. We did around INR 1,100 crores revenues last year. So what kind of run rates are we talking right now? Is the growth looking much higher because last year 1Q was a washout in terms of exports? So I just wanted to get a sense on that.
Nishit, as I mentioned, over a 9-month period, we have more than doubled our exports from India.
No, you mentioned that, Gaurav. But last year, 1Q would have been a washout as well, right, on export side? Or very low export side? So I just wanted to check, so INR 1,100 crores export run rate, are we looking at INR 2,200 crores kind of a run rate for this year? Is that correct?
Should be possible. I don't have the figures for this year. But even on Q3 alone, compared to Q3 last year, we are up close to 75%.
We have the last question for the day from [ Vishal Saraf ].
Sir, you mentioned about the OEM demand going forward, that it is picking up. Can you throw some light on replacement demand, both in TBR and PCR and 2-wheeler? All the 3 categories. How is the demand?
Yes. So [ Vishal ], the demand is picking up, but there the -- we didn't have a decline. So do we have a very strong pickup? No. It's better than Q3, but not the kind of swing that we are having on OEMs.
Okay. So the momentum of replacement has continued over Q3?
That's correct.
Okay. Both for TBR and PCR.
TBR more. PCR was always fairly strong, so it's more coming back for TBR.
Okay. And compared to last year, also, it was better. Because last year, we saw a lot of pent-up demand last Q4.
I won't have the figures that readily to be able to tell you figure-wise. More a generic sense right now.
Thank you. That brings us to the end of the call. I will hand over to Neeraj or Gaurav for any concluding remarks, post which we can close it.
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Thank you, everyone. I'd like to thank the management for taking out time. I also thank all the participants for joining in. Thank you.